How Much Money Should A Residential HVAC Company Spend On Marketing?
September 16, 2017
For residential heating and air conditioning business owners, a common question that I hear is, “How much money should I spend on my residential marketing efforts this year?” Most business owners should want to spend the least amount of money while attaining the highest manageable growth and net profit possible. There are target levels you want to shoot for, so let’s take a look at where you want those levels.
Before establishing what you want to spend on marketing, it is more important to know how much annual revenue you plan on making first. If you do not have an annual revenue goal, you should calculate this first, it is the single most important figure in setting up any type of annual budget. If you are unsure how to project your annual revenue goal, ask for help, there are those of us who will give you easy to understand tools and ways to set your own corporate budget!
Your target marketing budget is not always a simple decision, it largely depends on many factors like, do you sell service agreements? Is your company demand service focused or do you focus mostly only on replacements? Regardless of these answers however, a good and safe target range is 4% – 6% of your projected revenue. Some business models are much lower on that percentage, however unless you have a strong service agreement foundation, you should not go below 4%, ever!
You can overspend in marketing and you definitely can under spend as well. You always want to have a nice healthy growth in your business and you deserve double-digit net profits and a healthy happy customer base! Every year though you have to market if you want growth and want to have new customers to take care of and help keep comfortable.
So now that you know your budget should target 4% – 6%, the next question probably is, “What should I spend that money in?” In my years of experience marketing in our wonderful industry, the best answer to this I believe is, “Depends.”
No one likes that answer and it really is true, the answer depends on your consumer base and your goals. I have found however, that not putting all your eggs in one basket is a good way to market. It does not mean you will not heavily favor one type of marketing over another. In 2011’s terms, most areas still find a lot of success in direct mail, specifically postcard marketing, so for your company you might spend half of your marketing budget on direct mail, some may choose to spend 80% and then again some may not spend any on direct mail.
I believe the best mix for a company that does do direct mail, would be to have about 50% of your marketing budget in direct mail and then a percentage of your marketing in some that calls behind your direct mail. (Following all federal guidelines as the do not call registry of course). When you use this mix, the call center or person designated to call behind a mailing piece will on average double the response rate!
In addition you should have money put into online advertising and social media! The HVAC market is changing fast and a well designed website, a focus on organic results and even some PPC (Pay per click) marketing and of course social media is critical. You might also consider newsletters for retaining customers, possibly yellow pages (The internet is the yellow pages of today) and other marketing forums, it all really depends on your market. As long as you focus on targeting 4% – 6% figure then you are not overspending or under spending..
Once you begin marketing, you will want to track your expenses and your results! Decisions on where to market becomes much easier once you learn and know what is working for you. Give your marketing efforts time, some direct mail campaigns may take 5 or more exposures before you really start to see solid results.
As always, offer superior service, sell you and not your product! Take care of your customers and you will gain referral’s and enjoy caring for those precious customers who call on our ability to keep them comfortable!